Bright Outlook for German Consumer Recovery (CEF: GF; ETF: EWG)

Morgan Stanley economists Elga Bartsch and Thomas Gade note a bright outlook for German consumer recovery:

The outlook for a consumer recovery in Germany is the brightest it has been since the boom year of 2000. The strong German export performance together with a pick-up in gross fixed investment is gradually filtering through to the German labour market.

A rise in private-sector vacancies and sharp increase in corporate hiring intentions argue in favour of improving labour market conditions, we believe. A further pick-up in job growth together with a slight acceleration in wages and salaries will likely cause both disposable income and consumption to expand at a higher rate in 2006.

Our call for a consumer recovery in 2006 is underpinned by a marked rise in January retail sales, a continued increase in consumer confidence and in purchasing intentions, as well as sentiment in the retail sector, which have already lifted German confidence indicators back to or above the euro-area average.

Let's take a look at the two funds covering Germany:

● CEF New Germany Fund (GF): Sponsored by DWS Scudder in January 1990. Note that 9% of the fund is invested in the Netherlands.

Fund performance (from ETFConnect):

● iShares Germany Index Fund (EWG): Sponsored by Barclay's in March 1996.

Fund Performance (from ETFConnect):

Note the performance of the two funds benchmarked against iShares' Europe 350 Index Fund (IEV) over the last six years, and over the last two years:

GF, EWG, IEV Performance-Last Six Years

GF, EWG, IEV Performance-Last Two Years

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